Someone Fishy

It wasnt’ long befor last Thursday‘s conference call between financial analysts and Pixar Animation Studios turned to negotiations on a very-much-in-doubt new deal with the Walt Disney Co., Pixar’s partner on huge hits like Toy Story, A Bug‘s Life and Monsters, Inc. ”Just give Disney hell, okay?“ goaded big -media analyst Jeffrey Logsdon, unable to contain himself. What followed were sounds of snickering.

Such public displays of honesty are rare within the financial community. But when it comes to Disney, all bets are off now that the company is in the crapper. What was once respect and admiration for a great global brand has turned into scorn and exasperation. But corporations take on the personality of the people who run them, so it can be argued that, not counting those under federal investigation, Michael Eisner is the most rancid CEO in Hollywood, in America, and maybe the world. This fish stinks at the head. Now The New York Times has given Eisner an expiration date: to turn things around by November. (Full disclosure: I am in a legal dispute with Disney.)

That something was rank at Disney became apparent weeks ago when whispering had Eisner out by the end of the year and archenemy Jeff Katzenberg in. Los Angeles magazine’s latest issue showed Disney losing its legal fight to hang on to its multibillion-dollar Winnie the Pooh franchise. A news leak surfaced that Disney is secretly negotiating with mainland Shanghai to build a rival theme park to the Hong Kong Disneyland now under construction when Hong Kong officials thought they had negotiated exclusivity. Then the Magic Kingdom announced dismal earnings, two credit-rating firms threatened to downgrade Disney‘s debt, and Disney stock fell to an eight-year low. But the stench really spread on August 6 when Slate business columnist Daniel Gross wrote a rant on why Eisner should be fired under the astonishing headline ”The Louse in the Mouse House.“ Instead of screams from Disney management, Gross heard from former and current executives and employees, not one a defender of Eisner.

That the Happiest Place on Earth is run by the Most Miserable Company in Hollywood is nothing new; for years now, because of top-to-bottom defections of talented personnel at Disney, Eisner as a leader has more and more resembled ROTC storm trooper Doug Neidermeyer in National Lampoon’s Animal House, who was shot by his own troops. a Why was demonstrated with clarity when Eisner cowardly dispatched water boy Bob Iger to face down the financial anchors on CNBC about Disney‘s disastrous second quarter. Pity Eisner’s propagandists. On May 20, a handful of naive journalists made the trek out to Cal State Northridge because they were promised a sit-down with Eisner for what was at best a photo op: the Eisner Foundation‘s gift of $7 million over four years to the university (chump change after David Geffen’s $200 million donation to the UCLA School of Medicine.) When the reporters realized they were just window-dressing, and new Disney doorkeeper Zenia Mucha barred their access to the CEO, a tense standoff ensued. ”We need to humanize him beforehand,“ Mucha explained with surprising candor. Even Eisner‘s notorious micromanagement isn’t what it used to be; recent visitors to Disneyland‘s Space Mountain report seeing paint peeling from walls.

The Slate story gave the rumors of Eisner’s imminent ouster a sense of reality. Two days later, the Los Angeles Times broke a ”sources said“ story that Eisner was feeling the heat, finally, from the two most powerful members of Disney‘s infamously insider board of directors, Roy Disney and Stanley Gold, and that ”some pointed exchanges“ had taken place between Eisner and Gold, who back in 1984 had installed Eisner as head of the company in the first place. Within 24 hours, business pages began speculating on Eisner’s possible successors. Faced with the press in a feeding frenzy, Eisner had his own sharks on the payroll: His corporate communications office now includes a seasoned Republican pit bull like Mucha as well as a 1996--2000 spokesman and communications strategist for Enron, Gary Foster.

Out of the blue late last Friday, Disney disclosed with the SEC that, for the past year, it employed immediate family members of three supposedly independent directors, and one of them was Gold‘s daughter. The filing looked fishy, like Eisner’s payback to Gold for griping. After all, the New York Stock Exchange is as yet only proposing the corporate-governance standard to define an ”independent“ director. Gold‘s influence would be drastically reduced if he is forced to resign as chairman of Disney’s corporate governance and nominations committee. It only added to suspicions when The Wall Street Journal, increasingly Eisner‘s official apologist, bent over backward to quote sources claiming Gold didn’t view Disney‘s actions as aimed at him. But others sure did.

The latest word is that more directors are daring to quiz Eisner, and the 16-member board may change composition due to imminent retirements. If their replacements continue to kow-tow to Eisner, he’ll stay through 2006. He may survive but can Disney survive him?

In the last day or so, tipsters have phoned influential entertainment journalists detailing a laundry list of Eisner errors: from grossly overpaying for the Fox Family Channel while nixing a bargain-basement price for 50 percent of BravoIFC; from passing on Harry Potter, The Lord of the Rings, new film versions of Peter Pan and Pinocchio, and half of Ice Age, to saying no to TV shows like CSI, The Weakest Link and Felicity. And before green-lighting The Sixth Sense, Eisnersold off international to Spyglass Entertainment because, he said, it starred an action hero with a gun and no one would keep the ending secret. Even after it became one of Disney‘s blockbusters that year, Eisner was stingy on its Oscar campaign.

Back at Pixar, founder and CEO Steve Jobs didn’t once mention Eisner by name, a deliberate snub since the two men are in a bitter dispute over sequels. (Jobs told analysts that Toy Story II was it.) That Jobs hates Eisner is the worst-kept secret in the entertainment industry and explains why, as soon as February 2003, when Pixar delivers Finding Nemo and is contractually free to start negotiations on a new partnership, he‘ll likely be looking at a distribution deal elsewhere. And why Pixar already has started work on its first non-Disney film, which means today’s most successful animation house in the world is about to become Eisner‘s competitor. That’s exactly the sort of news certain to create a stink among Disney shareholders.